California State Budget 2025-26

The governor’s 2025-26 budget proposal breaks the cycle of deficits past with a cautiously optimistic projection of a $322.2 million surplus. The source of this modest surplus, which comes as a great surprise to many still reeling from the $37.9 billion shortfall initially projected this time last year, is allegedly in part due to a successful implementation of the governor’s two-year budget framework approach. This surplus differs from the projections released by the Legislative Analyst’s Office (LAO), who estimated a deficit of $2.2 billion, which the governor claims to have accounted for in adjustments to Proposition 98 and the Special Fund for Economic Uncertainties (SFEU). In other words, California has purportedly balanced their budget so successfully that the expected deficit has not only been closed but has been replaced with a small surplus.

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This document is intended to provide you with general information regarding the 2025-26 California state budget. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.